Virgin Blue is flying high after the ACCC decision


Virgin Blue is flying high after the ACCC decision

 In a major win for Virgin Blue, the Australian Competition and Consumer Commission (ACCC) has given the green light for the airline’s alliances with Air New Zealand and Etihad Airways.

The Virgin Blue-Air New Zealand tie-up was initially blocked by the ACCC, however the regulator today dropped its opposition and the new alliance will result in an increase in flights across the Tasman on some routes and the protection of others, including Wellington.

Under the alliance, Virgin Blue and Air New Zealand would take a unified approach to route planning, pricing, revenue management and schedules alongside reciprocal frequent flyer and lounge access agreements.

“The ACCC considers that the Alliance is likely to benefit passengers in a number of ways including more choice of routes and frequencies, and potentially lower fares as a result of cost savings and efficiency improvements,” said ACCC chairman, Graeme Samuel.

“The ACCC is still concerned that the Alliance may affect competition on a number of routes between Australia and New Zealand, particularly routes involving Wellington.

“However, the ACCC has imposed a number of conditions on authorisation which are designed to address these competition concerns,” he said.

While the airlines sought authorisation for five years, Samuel said the ACCC thought it appropriate the review the developments earlier and as a result, authorisation has been granted until December 31, 2013.

Air New Zealand Chief Executive Officer Rob Fyfe has called the decision a win for consumers on both sides of the Tasman.

 “I’m pleased that formal approval has been given recognising the benefits this will bring to our customers,” Fyfe said.

“I would like to thank the ACCC for its thorough consideration of the issues and coming to a determination that favours customers and will see the Tasman market continue to grow,” he said.

The tie-up still faces a further hurdle, with the alliance still requiring a decision from the New Zealand Minister of Transport – something expected in the coming days. However, many industry insiders expect a favourable ruling to come from the minister’s office.

Virgin Blue Group of Airlines Chief Executive Officer and Managing Director, John Borghetti said both decisions are great news for consumers and for Australian tourism as the group continues to grow Australia’s second major international airline.

“We are extremely pleased that the way is now cleared for us to create a truly global airline that not only offers a great product and service but also greater frequencies and great value for money fares,” he said.

Borghetti said the approval of the partnerships is a key step in implementing the company’s strategy of building an international network with global coverage to complement Virgin Blue’s core domestic business.

“These are truly game-changing alliances,” he said.

The Etihad Airways partnership would see codesharing, cooperation on joint pricing and scheduling of services between the Middle Eastern carrier and the Virgin Blue Group alongside the launch of V Australia services from Sydney and Brisbane to Abu Dhabi.

“The Etihad partnership will see us establishing an international hub in Abu Dhabi,” Borghetti said.

“This will allow us to offer corporate and leisure travellers a very attractive one-stop alternative to more than 14 destinations in Europe, plus the Middle East and Africa without backtracking or going via Heathrow.

“Guests will also enjoy mutual frequent flyer earn and redemption capability and a global frequent flyer program,” he said.

Thrice-weekly flights from Sydney to Abu Dhabi are expected to launch in February 2011 and between Brisbane and Abu Dhabi by February 2012.

“The ACCC considers that the alliance is likely to promote competition and result in benefits for Australian consumers through new international services and increased online connections,” Samuel said.

He said the ACCC is of the view that the alliance is unlikely to result in any public detriment given that Virgin Blue and Etihad currently do not directly compete on any routes.